Explainer: Is it time for a rent freeze?

Or do we need rent control?

Welcome to the third post in the Emily Writes Weekly Explainer series. I asked you what election issues you wanted to know more about and so many of you asked me to look at renting and housing stability.

Previously, I talked to Simon Wilson about The Government's Three Waters Reform and Mark Potter about the national teacher strikes.

This time, I’ve been able to pick the brain of Renters United national organiser Éimhín O'Shea.

Renters United are a nationwide collective of renters and advocates for renters rights. I’ve volunteered with them before, and I have been impressed by their work pushing for safe and healthy homes. When Eddie was very unwell, I talked to a lot of parents who had very, very medically fragile babies who were leaving hospital for rentals that had black mould and windows that didn’t shut properly. Inevitably those babies would return to the ward with respiratory illnesses.

Over 40,000 New Zealand children are admitted to hospital every year due to income poverty and inadequate housing. Sky high rents contribute to this problem.

So let’s talk about one lever that could be pulled - The rent freeze.

Photo by Tierra Mallorca

Emily: What is a rent freeze?

Éimhín: A rent freeze boils down to quite a simple idea: we prohibit rent increases in recognition of extraordinary pressures financial or otherwise being faced by renters. We’ve done it before in Aotearoa recently; in 2020 we put one in place for six months because of the Covid-19 pandemic. It’s not actually that radical of a proposition, it’s just putting pause on rent increases for a certain period of time, it doesn’t even go so far as a rent reduction.

Why do you think we need a rent freeze?

In the middle of a cost of living crisis and the climate emergency wreaking havoc across Aotearoa, there’s a really strong case to be made for instituting a rent freeze. We know that for the vast majority of renters their largest expense is rent, and as such one of the best short-term policy tools we have to alleviate economic hardship is to call time on rent increases through a freeze.

Should we just have a nationwide rent freeze?

Rent freezes are a really useful tool in alleviating pain in the short term, and as such we support and advocate for them, but the long term sustainable solution we need for the underlying issue of high rent prices is rent control. 

A nationwide rent freeze is useful for responding to crises but if we’re serious about making renting more just and less exploitative, we need to rethink how we allow rent prices to be set more permanently. Rent control is that long term solution. We’ve been advocating for it for a long time, and it offers our best chance for a balanced but meaningful addressing of the issues of high rents. 

Our preferred iteration is as follows and we’re confident that this is balanced towards all parties, while also offering genuine and meaningful reform:

• Limit rent increases to no more than inflation, based on the Consumer Price Index (CPI) in the preceding 12 months.

• Allow reasonable and proportionate rent increases above CPI where significant improvements have been made to the quality or facilities of the home – beyond ordinary maintenance. Such improvements would not include those made in order for the property to comply with minimum standards.

• Prevent unreasonable rent hikes between tenancies by requiring the landlord to set rent within a reasonable range of the previous rent charged for that property (except where significant improvements beyond normal maintenance have been made) and inform incoming tenants in writing of the rent paid by the previous tenants.

Photo by Mika Baumeister

The Human Rights Commission supports a rent freeze because their report found rents were rising faster than income and inflation. HRC housing inquiry manager Vee Blackwood has said more than half of renters were spending more than 30 percent of their income on rent. Blackwood told RNZ "The overall cost should be no more than 30 percent of your income after tax being spent on your housing costs, but we know that almost half of renters do spend that or more and this is predominantly felt by those on the lowest incomes”. Is that what you’re seeing in your mahi with Renters United? Is there political appetite for rent freezes?

Recognising that being a renter’s advocacy group led by renters likely lends us to bias on this, I would certainly say so. There are a litany of issues facing renters in Aotearoa, but potentially the most commonly experienced is being compelled to pay rent higher than you are able to comfortably afford. This is true across a wide spectrum of ‘types’ of renters, from families to students to young professionals and workers to older people up and down Aotearoa there is a strong sense that we’re paying more than we should and that something needs to change.

Whether this is shared by politicians is less clear. New Zealand’s domestic economy is highly intertwined with our housing market, more so than in countries we consider ourselves comparable to, and so there exists political challenges to introducing meaningfully beneficial and therefore significant reforms. That however, is not an excuse, and the rent freeze in 2020 only goes to show that when enough pressure exists the government will exercise its ability to address rent prices. This makes their refusal to do so in the longer term all the more insidious. 

Do you think the wider public understands what renters are facing? 

This is a tricky one, one thing I’d probably want to highlight is that the ‘wider public’ are renters. The ‘kiwi dream’ of quarter acre paradises is well and truly dead and due to a range of factors beyond rent prices alone, the proportion of renters as opposed to property owners is only likely to increase.

Landlords are a powerful lobby group in society, and this has led historically to a significant gap between the impression and realities of renting in Aotearoa. I think this has begun to shift, but there’s still a long way to go to building the consensus of solidarity we need to bring about the radical change that would bring an end to renters’ suffering.

Property Investors Federation president Andrew King has said "If rent freezes are a good idea, then why not petrol or food price freezes?” Which seems like a strange argument because I actually think we should have petrol and food price freezes but can you explain how a rent freeze is actually implemented?

The Property Investors Foundation are a lobby group for landlords, and have a vested interest in allowing, enabling, and supporting landlords to extract the absolute maximum that they can from tenants. This is a deliberately distracting “whataboutism” on their behalf and actually illustrates the strength of the arguments for a rent freeze. We haven’t suggested petrol or food price freezes, and this reach for a hypothetical shows that they aren’t willing to address the writing on the wall: Rent is Too High. They might be able to argue about abstractions, but while our communities are suffering I’m not interested in engaging with it.

Implementation of a rent freeze is done through legislation, in 2020 it was done as part of the Covid-19 response measures but it can be easily done by the government of the day at any time. Importantly, a rent freeze doesn’t actually ‘change’ anything about tenancies as they are and there isn’t actually a need for any action from either landlords or tenants, just to simply not raise the rent. As housing policy goes, it’s one of the more simple options.

Photo by Jon Tyson on Unsplash

Critics have said rent freezes reduce rental supply and make the housing crisis worse? Do you think that’s the case? 

No. When a landlord sells a home, it doesn’t sprout legs and run away. Someone will be able to purchase that home and live in it, or continue to rent it out. House prices are prohibitively high for all but those on the highest incomes or who can leverage existing capital, and landlords having to sell because they can no longer extract as much money from renters is not a bad thing.

The primary driver of both the housing crisis and extortionate rents is a lack of supply of housing and a rent freeze does not magically remove housing, it just means that less profit can be extracted from it. While a landlord selling a home does often mean a renter having to move, when renters already have so little rights to true security of tenure this critique cannot be made in good faith. 

It is entirely possible for a landlord to sell a property with a current tenancy contract attached. Our Plan to Fix Renting recommends that the government make this compulsory. When a landlord sells a property and terminates a tenancy they do so consciously in order to protect their own interests. If they were in the business of providing someone a home then they would be interested in doing what they can to ensure that person continues to be homed, especially after they just paid off their mortgage.

Even with rent controls being a landlord would still be profitable, and we’ve never suggested implementing rent controls without implementing incentives for construction of new builds by both public and private suppliers.

With mortgages increasing, some rental owners are increasing their rents so they can continue to have income above those payments. They might sell due to renting no longer being a viable profit earner for them. Do you think that will happen and what impact do you think that will have on the housing market?

I hope so! It’s easy to forget how absurd renting and landlordism are as a social construct. Being a landlord simply means that you were able to buy more housing than you yourself need, it’s absolutely unhinged that there’s an expectation that *someone else* (a renter) should not only pay *your* mortgage, but that you should also be gleaning direct profit from tenants in addition to your own untaxed capital gains as well as having your costs covered.

In an ideal world, as a human necessity, housing wouldn’t be for profit at all and I struggle to find sympathy for those who have hoarded more than they need at the expense of others having to divest due to being prevented from unfettered profiteering.

More homes being on the market is only a good thing in a housing crisis for renters and for first home buyers who are the ones most affected by it. It’s easy to get caught up in the macro-economics of housing, but we need to remember the social effects of the housing market.

More people being able to afford their own homes due to prices falling is a good thing, but I’d also suggest that given the scale of house price increases in recent years and the extent to which demand continues to outstrip supply that even rent control or a rent freeze is unlikely to meaningfully impact that landscape.

Is there a case for a temporary rent freeze due to the flooding in Tāmaki Makaurau and Cyclone Gabrielle hit areas?

Yes. In collaboration with ActionStation and 22 other organisations, we launched an open letter and petition to the government to institute a rent freeze in February. We know that when disasters like this strike, we cannot allow a free market to dictate rental prices and we’ve seen that when the opportunity exists for profiteering at the expense of our communities we need robust action from the government to protect those most vulnerable from greed.  

Photo by Julian Hochgesang

Finally, if we don’t look at rent freezes, what other options are available to the government and private landlords?

For the government, the best solution is to legislate rent controls as detailed above. We’re long past the time for asking landlords nicely to not exploit our communities, it’s time for the government to step up and fulfill its obligation to intervene when the market lets down the most vulnerable.

Rent control is not an extreme measure, choosing to continue to allow greed to impoverish us is. 

For private landlords it's simple: don’t raise your rent. Every single dollar you raise rent by is one less that the renter has for food, clothing, energy, childcare, education, transport, and all the other things that we need to survive. A rent freeze is a response to a problem that doesn’t need to exist.

If you don’t want there to be a rent freeze, don’t contribute to creating a market that necessitates it.